This case is part of a wider article, "No Contract. No Problem?", where I explained the importance of taking legal advice when buying, or acquiring an interest, in a property, regardless of whether it is a building or land, I explained the relevance of Section 2 of The Law of Property Act (Miscellaneous Provisions) Act 1989 which imposes some restrictions on individuals’ freedom to determine what contractual obligations they will accept in the course of that transaction. The following case study demonstrates what can happen when you have what you think is a clear agreement to purchase, or acquire an interest in, a property or other land, from somebody but it is either not in writing, or only partially in writing. If you do not have a contract to purchase that satisfies the Act’s requirements, you may be able to enforce alleged property rights via a claim based on a ‘common intention constructive trust’; alternatively, the equitable claim of proprietary estoppel may also come to the rescue. You can read the detailed background to this cases here.
In this case[1], Mrs Thandi had agreed to sell a mixed-use property to Mr Saggu for an agreed ‘fixed’ price of £270,000. She subsequently withdrew from the agreement, claiming it was oral and non-binding. Mr Saggu disagreed and registered a unilateral notice against the property title. Mrs Thandi applied for its removal, following which an interim injunction was granted. Mr Saggu counterclaimed. In Court, several issues were considered, including whether the original agreement was binding and enforceable, or not; made under undue influence; had been breached; and if damages should be awarded. Additionally, it considered whether, if the agreement was not valid, the doctrines of either proprietary estoppel or constructive trust should apply. The Court rejected the claim for damages for breach of contract but upheld the proprietary estoppel claim. You can read more detail about the case here.
The subject of this case was a mixed-use property and the main issue arising was whether or not there was a valid contract for sale of the same.
Unlike in Pathway, there was an agreement here that had been reduced to writing. Specifically, the agreement was contained in three letters all of which were signed by the parties, and which identified Mrs Thandi as the proprietor, Mr Saggu as the buyer, Mrs Thandi as the seller and that Mrs Thandi was obliged to sell and Mr Saggu to buy the property at the agreed "fixed" price of £270,000.
That stated, the Judge found as a fact that the three letters did not contain all the terms which were actually agreed between the parties. Such were that 10% deposit would be paid on exchange, Mr Saggu would fund the legal costs of Mrs Thandi in the instruction of solicitors, and that completion would take place within a year. At least the first two of these terms were agreed before and at the time of each of the three letters. The third of them was most likely agreed after them.[2] This was fatal to the contractual claim because, as required by section 2 of the Act (above), the agreement did not contain all the terms which the parties had expressly agreed in one document.[3]
Proprietary estoppel was pursued as an alternative claim. The Judge was inclined to grant, similarly to Pathway, recovery of the deposits but those could equally be recovered as a restitutionary claim, so the equitable claim did not add anything.[4]
Whilst order for transfer based on the proprietary estoppel was abandoned as a remedy, due to the property having been sold in the interim, the Judge nonetheless weighed in on proprietary estoppel as a basis of claim in circumstances where what the party is relying upon is a void and therefore unenforceable agreement under Section 2(1) of the Act:
Proprietary estoppel is not affected by section 2(1) at all because section 2(1) regulates the requirements of a contract for the sale or other disposition of an interest in land and a proprietary estoppel claim, even if promise based, is distinct from a contractual claim.
- There was no reason why simply because the parties intended a contract, which then failed through non-compliance under section 2(1), this should preclude a party from inviting the court to grant equitable relief to prevent any unconscionability.
- This is so even if the assurance or promise is contained in an agreement rendered "non-contractual" by section 2(1). In that scenario the party relying on an estoppel claim is not circumventing section 2(1). They are simply being put back into a non-contractual position. Like any other claimant they have to prove the requisite elements of a proprietary estoppel claim. They are no better off. But equally they should be no worse off.
- There should be no problem using proprietary estoppel, even when dealing with a contract that is void by virtue of section 2(1) of the Act, provided that the estoppel is aimed at doing the "minimum equity" necessary to prevent an injustice. Whilst it may be said to be impermissible to allow the proprietary estoppel to fulfil expectations, as this might undermine the Act, there can be no objection to estoppel operating to reverse any detriment as a result of the invalid contract.
- If the requisite elements of a proprietary estoppel claim are satisfied then the court should be able to grant relief to remedy any unconscionability. Section 2(1) should not make the court squeamish in doing so. This recognises the equity in reversing unconscionable conduct when it is present. It does not undermine the policy behind Section 2(1) – the parties are not contractually bound by any contract. If the contract was enforceable it could be enforced without any detrimental reliance.
- There may be greater problems in a "contractually related" case where the relief sought and granted is the same as enforcing a contract which was rendered invalid by section 2(1), at least as the law is currently articulated. There is difficulty in concluding an "expectation" performance remedy should be granted where a constructive trust cannot be found.[5]
In short therefore, to remedy the unconscionability of a proprietary estoppel claim based on an invalid and unenforceable agreement under section 2 (1) of the Act is itself is considered okay, but it may not be okay to do so by ordering transfer of the subject property since that would flout the Act. That is despite modern-day assumption to the effect that fulfilment of expectation, is the appropriate remedy for a proprietary estoppel based claim.[6]
[1] [2023] EWHC 2631 (Ch) “Saggu”
[2] Para 103, Saggu
[3] Para 105, Saggu
[4] Paras 140 to 143
[5] Paras 132 to 139 of Saggu
[6] See Guest
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
